Protectionism on services costing the EU 2.6% of GDP, says MEP

Implementing the Services Directive could rise economic output by some 2.6% in five to 10 years, MEP Anna Maria Corazza Bildt told EurActiv ahead of an EU leaders meeting in Brussels dedicated to growth.

The services sector makes up some 70% of Europe’s gross domestic product and total employment, yet discrimination, administrative burdens, red-tape, and the costs that come with selling services across the EU’s single market, are holding the sector’s growth, particularly among SMEs.

Corazza Bildt was speaking to EurActiv ahead of the publication of her report on the services directive in the European Parliament, expected on Friday (15 March).

'Polish plumber'

The service directive, also known as the Bolkestein directive, caused a stir when it was first launched in 2000.

European politicians, particularly on the left, heavily criticised the rules fearing they would lead to social dumping between poorer and richer member states. France popularised the infamous “Polish plumber”, a symbol of cheap labour coming from central and eastern Europe as a result of the directive.

But to Corrazza Bildt the reverse is true. “Economic protectionism”, she said, was crippling EU-wide growth.

“It’s the other way round. To create growth and jobs you have to open up and really implement the full freedoms on which the internal market lies.”

The MEP added that Europeans should be aware of the costs of non-implementation, more than ever in a time of crisis.

“The citizens of Europe have the right to know why this services directive is not implemented, which means they are deprived of jobs.”

Business crippled by lack of cross-border rules

According to the Swedish MEP, Businesses continue to encounter problems selling their service across European borders despite the EU-wide rules.

For example, a company wishing to establish itself in another member state often has to take out new insurance because the other member state does recognise the insurance from its country of origin. The business may also have to jump through further administrative hoops and take numerous tests.

“There are all sort of different barriers, and some of them are hidden, like double standard requirements, economic test requirements, legal form requirements from one member state to another, economic needs tests, discrimination from digital downloads, price restrictions”, explains Corazza Bildt, a Swedish Christian Democrat MEP.

The freedom of establishment and the freedom to provide services are both central principles governing the single market for services. The rules entitle EU entrepreneurs to establish a business in any EU country or to temporarily supply services across borders, to other EU countries, without setting up an establishment there, for example by moving across borders, or via the internet, the Commission says.

Discrimination

In her Parliament report, Corazza Bildt will call on EU member states to fully carry out the regulation. The majority of EU countries, she said, have not implemented the rules properly or completely despite the deadline for their transposition into national law coming in 2009. Further, some EU countries did not completely transpose the rules until May 2012.

“All the member states have transposed the services directive but transposed doesn’t mean fully implemented”, Corazza Bildt said. “The Commission has already started pre-infringement procedures, the whole machinery or procedure for infringement of the internal market.”

The European Commission can then take countries which continue to flaunt the rules to the European Court of Justice. “Then if there is a need for naming and shaming individual member states I will not refrain from it.”

The MEP blamed governments’ protection of local corporations for their failure to follow the rules.

“You really get into the crunch of how member states operate, protecting their national market versus the internal market,” she said. Currently, companies in member states profit from discriminating against consumers and businesses wishing to operate across national lines.

“One good example is travel packages,” Corrazza Bildt said. “If you buy a travel package in one member state and you’re a resident in that member state, you pay 10. If they see that you are resident in another member state you pay 12, both on the net and physically.

“So the travel service providers are discriminating based on your nationality and your place of residence,” she said.

At a 20 February Parliament hearing, a representative of the European Consumer Centre, gave examples of a car rental company at a German site refusing their service to Austrian consumers on the grounds that it was reserved for residents of Germany. The company sold the service at a cheaper price in the German site than in the Austrian site, a discriminatory practice which contravenes EU law.

Background

The Services Directive was adopted in 2006 and is seen as a key tool to removing barriers to operating in Europe's internal market. Currently, only 5-10% of EU GDP is generated by providing cross-border services.

The original deadline for member states to fully implement the directive into national law was 31 December 2009.

A November 2009 debate in the European Parliament's internal market and consumer protection committee (IMCO) saw a number of MEPs express misgivings over the directive's implementation in EU member states, not merely in terms of timing but also concerning the methods used by individual countries.